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A house in Palo Alto sells for $2 million. It rents for $60,000 per year, but the owner has to pay $30,000 in property taxes,
A house in Palo Alto sells for $2 million. It rents for $60,000 per year, but the owner has to pay $30,000 in property taxes, so that the net rental income the owner earns during the year is $30,000. The discount rate is 7 percent. To rationalize the price today, what must be the market expectation of the price 1 year from now?
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